Watsco Sets New Records for Earnings Per Share, Operating Margins and Sales During 2014
Fourth Quarter Results
Key performance metrics:
-
38% jump in earnings per share to a record
69 cents -
30% increase in operating income to a record
$52 million - 100 basis-point expansion in operating margins to a record 5.9%
- 40 basis-point improvement in gross profit margin
- 60 basis-point reduction in SG&A as a percentage of sales to a record low
-
6% sales growth to a record
$877 million
Sales trends:
- 8% growth in HVAC equipment (65% of sales)
- 2% increase in other HVAC products (30% of sales)
- 8% increase in commercial refrigeration products (5% of sales)
It is important to note that the fourth quarter of each calendar year is highly seasonal due to the nature and timing of the replacement market for air conditioning systems, which is strongest in the second and third quarters. Accordingly, the Company’s fourth quarter financial results are disproportionately affected by this seasonality.
Full Year Results
Key performance metrics:
-
17% increase in earnings per share to a record
$4.32 -
13% improvement in operating profit to a record
$306 million - 60 basis-point expansion in operating margins to a record 7.8%
- 20 basis-point improvement in gross profit margin
- 30 basis-point reduction in SG&A as a percentage of sales to a record low
-
5% sales growth to a record
$3.94 billion
Sales trends:
- 7% increase in HVAC equipment (64% of sales)
- 9% growth in U.S. residential equipment
- 2% increase in other HVAC products (31% of sales)
- 7% increase in commercial refrigeration products (5% of sales)
Mr. Nahmad added: “2014 was another great year, which we believe
highlights the stability and consistency of our company. This
performance includes substantial investments made during 2014 to enable
future growth. We added 200 employees with an emphasis on sales and
market development, deployed innovative new technologies to enhance our
customer-experience, expanded the
Results reflect a 10% greater ownership interest in
Dividends
Conference Call Information
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About
There are approximately 89 million central air conditioning and heating
systems installed in
This document includes certain “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements are based on management's current expectations and are
subject to uncertainty and changes in circumstances. Actual results may
differ materially from these expectations due to changes in economic,
business, competitive market, new housing starts and completions,
capital spending in commercial construction, consumer spending and debt
levels, regulatory and other factors, including, without limitation, the
effects of supplier concentration, competitive conditions within
Watsco’s industry, seasonal nature of sales of Watsco’s products, the
ability of the Company to expand its business, insurance coverage risks
and final GAAP adjustments. Forward-looking statements speak only as of
the date the statement was made.
WATSCO, INC. Condensed Consolidated Results of Operations (In thousands, except per share data) (Unaudited) |
||||||||
Quarter Ended December 31, | Year Ended December 31, | |||||||
2014 | 2013 | 2014 | 2013 | |||||
Revenues | $876,787 | $827,352 | $3,944,540 | $3,743,330 | ||||
Cost of sales | 662,492 | 628,822 | 2,988,138 | 2,844,077 | ||||
Gross profit | 214,295 | 198,530 | 956,402 | 899,253 | ||||
Gross profit margin | 24.4% | 24.0% | 24.2% | 24.0% | ||||
SG&A expenses | 162,319 | 158,415 | 650,655 | 628,044 | ||||
Operating income | 51,976 | 40,115 | 305,747 | 271,209 | ||||
Operating margin | 5.9% | 4.9% | 7.8% | 7.2% | ||||
Interest expense, net | 1,416 | 1,179 | 5,206 | 5,830 | ||||
Income before income taxes | 50,560 | 38,936 | 300,541 | 265,379 | ||||
Income taxes | 15,777 | 11,006 | 91,839 | 77,660 | ||||
Net income | 34,783 | 27,930 | 208,702 | 187,719 | ||||
Less: net income attributable to noncontrolling interest | 10,711 | 10,609 | 57,315 | 59,996 | ||||
Net income attributable to Watsco, Inc. | $24,072 | $17,321 | $151,387 | $127,723 | ||||
Diluted earnings per share: | ||||||||
Net income attributable to Watsco, Inc. shareholders | $24,072 | $17,321 | $151,387 | $127,723 | ||||
Less: distributed and undistributed earnings allocated to non-vested (restricted) common stock | 1,818 | 1,239 | 11,435 | 9,053 | ||||
Earnings allocated to Watsco, Inc. shareholders | $22,254 | $16,082 | $139,952 | $118,670 | ||||
Weighted-average Common and Class B common shares and equivalent shares used to calculate diluted earnings per share | 32,399,764 | 32,292,276 | 32,358,854 | 32,258,068 | ||||
Diluted earnings per share for Common and Class B common stock | $0.69 | $0.50 | $4.32 | $3.68 | ||||
WATSCO, INC. Condensed Consolidated Balance Sheets (Unaudited, in thousands) |
||||
December 31, | December 31, | |||
2014 | 2013 | |||
Cash and cash equivalents | $24,447 | $19,478 | ||
Accounts receivable, net | 434,234 | 399,565 | ||
Inventories | 677,990 | 583,154 | ||
Other | 20,664 | 18,905 | ||
Total current assets | 1,157,335 | 1,021,102 | ||
Property and equipment, net | 53,480 | 45,418 | ||
Goodwill, intangibles, net and other | 580,252 | 603,011 | ||
Total assets | $1,791,067 | $1,669,531 | ||
Accounts payable and accrued expenses | $286,853 | $243,399 | ||
Current portion of long-term obligations | 169 | 107 | ||
Total current liabilities | 287,022 | 243,506 | ||
Borrowings under revolving credit agreement | 303,199 | 230,044 | ||
Deferred income taxes and other liabilities | 68,807 | 68,589 | ||
Total liabilities | 659,028 | 542,139 | ||
Watsco's shareholders’ equity | 883,960 | 840,396 | ||
Noncontrolling interest | 248,079 | 286,996 | ||
Shareholders’ equity | 1,132,039 | 1,127,392 | ||
Total liabilities and shareholders’ equity | $1,791,067 | $1,669,531 | ||
Condensed Consolidated Statements of Cash Flows (Unaudited, in thousands) |
||||||
Year Ended December 31, | ||||||
2014 | 2013 | |||||
Cash flow from operating activities: | ||||||
Net income | $208,702 | $187,719 | ||||
Non-cash items | 30,937 | 37,245 | ||||
Changes in working capital | (94,659 | ) | (74,695 | ) | ||
Net cash provided by operating activities | 144,980 | 150,269 | ||||
Cash flow from investing activities: | ||||||
Capital expenditures, net | (19,124 | ) | (14,257 | ) | ||
Cash flow from financing activities: | ||||||
Dividends on Common and Class B Common stock | (69,870 | ) | (39,836 | ) | ||
Net proceeds under revolving credit agreement | 74,729 | (83,559 | ) | |||
Purchase of additional ownership from noncontrolling interest | (87,735 | ) | -- | |||
Distributions to noncontrolling interest | (43,258 | ) | (69,494 | ) | ||
Other | 5,927 | 3,840 | ||||
Net cash used in by financing activities | (120,207 | ) | (189,049 | ) | ||
Effect of foreign exchange rate changes on cash and cash equivalents | (680 | ) | (1,255 | ) | ||
Net increase (decrease) in cash and cash equivalents | 4,969 | (54,292 | ) | |||
Cash and cash equivalents at beginning of period | 19,478 | 73,770 | ||||
Cash and cash equivalents at end of period | $24,447 | $19,478 | ||||
Source:
Watsco, Inc.
Barry S. Logan, 305-714-4102
Senior Vice President
blogan@watsco.com